How to structure a deal when inventory dominates the balance sheet?

May 18, 2026

by a searcher from HEC Montréal in Montreal, QC, Canada

Hi everyone I am currently working on a transaction where the target carries a very large amount of inventory, and we are trying to determine the best way to structure and finance the deal within the financial model. Quick overview: - The company operates in the alcohol / wine industry - The business model is built around scarcity: they age wine and spirits over long periods and release inventory only once matured and market supply is constrained - Revenue is ~$150M with ~$12M EBITDA - Inventory on the balance sheet is worth ~$80M Hypothetically, let’s say the business is acquired for $70M EV and normalized NWC at closing ends up being ~$70M. In practice, it feels like you are effectively buying the business twice (for $140M), despite it generating only $12M of EBITDA from which you'll be servicing debt. How would you typically think about financing and structuring a transaction like this? Inventory-backed facilities? Longer-dated debt? Seller financing the inventory? Different valuation/structure approach? Curious to hear your thoughts and experience with these types of situations! Thanks in advance.

Reply by a searcher
from Gonzaga University in Denver, CO, USA

I think two ways to think about it IMO. 1. as a going concern business you value it off a multiple of the TTM $12m of EBITDA. The inventory is necessary to support the business generating that EBITDA so its sort of like working capital or assets. 2. You value it as just the assets. Run a DCF on the value of the assets and purchase for that. I think the NWC piece is a bit of a misnomer. You've already got inventory on hand that will age into product so really you are just back filling each year to offset what you sell (or maybe a little more for growth). an ABL facility can be particularly helpful for these types of business as you can use the inventory as collateral for the loan, and ABLs are often cheap

Reply by a professional
from University of Houston in Houston, Texas 77002, États-Unis

It seems like the inventory may have some value over time? Just may be excessive? I agree with David. Wouldn't purchase it all upfront or roll into the acquisition--rather a consignment option or buy at cost. But need to take into account that age and scarcity does deliver value. What would the existing owners do with the excess?

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